New Zealand Dollar Fell After RBNZ Doubled Its QE Program

As the first few countries to ease the coronavirus restrictions, New Zealand’s economy will recover faster as well. Long NZD/USD?

The Reserve Bank of New Zealand (RBNZ) left official cash rate on hold at 0.25% as widely expected, but open doors to further interest rate cut, including taking them negative if needed.

The RBNZ also increased its bond-purchase program to NZ$60 billion from NZ$33 billion.

Furthermore, RBNZ is also prepared to add Large Scale Asset Purchase (LSAP) program and provide fixed-term loans to banks.

New Zealand dollar dived sharply after the announcement. This could be a knee-jerk reaction given that nearly all the central banks around the world are expanding its stimulus to support the economy.

The economy contracted 2.4% in Q1 and is expected to weaken to 21.8% in Q2.

Given that the New Zealand economy is quick to contain the pandemic and is looking to reopen soon, the New Zealand dollar could strengthen against the rest of the currencies.

NZD/USD could head higher towards 0.6130.

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